How the Hell does North Korea Manage to Earn Foreign Exchange?

19 04 2017

Kaesong Industrial Park - workers(Charis Chang, 2017.04.18, www.news.com.au) From the outside North Korea looks like an impoverished state cut off from the rest of the world. But during its weekend procession, the isolated regime managed to put on an impressive display of its rockets and military strength, in defiance of growing American warnings about its military capability.

While many have the impression of North Korea being a poor country that can’t feed its own people, Leonid Petrov told news.com.au that it had large stockpiles of natural resources that it used to fund its weapons research.

“North Korea is a mountainous country that has huge natural resources including deposits of high quality coal, gold, silver, uranium, iron ore and rare earth metals,” said Dr Petrov, a visiting fellow at the Australian National University College of Asia and the Pacific.

He said North Korea had exported its minerals to allies such as China and the Soviet Union for decades until the collapse of the communist bloc. Since then it had been more proactive in international trade, although the tightening of sanctions has seen its export ability curtailed recently.

Dr Petrov said China in particular had maintained trade in North Korea and was keen to keep a monopoly on its rare earth metal trade.
“So China buys everything North Korea is prepared to offer (of its rare earth metals),” he said. These metals are important because they are used the production of many 21st century products like mobile phones, computers, LCD screens and cars.

Another way that North Korea earns its money is by exporting its workers to China, Russia, the Middle East, Eastern Europe and South East Asia. In fact there were no visa requirements between North Korea and Malaysia until early this year, when tens of thousands of North Korean workers were deported following the assassination of North Korean president Kim Jong-un’s older brother Kim Jong-nam.

“Tens of thousands of North Koreans are sent overseas to work in restaurants, construction sites, as vegetable growers and builders of monuments in places like Africa,” Dr Petrov said.

“Dictatorships like big projects and North Korea can offer them labour to build big monuments, highways and airports.” Dr Petrov said the “lion’s share” of the worker’s wages went to the North Korean government.

North Korea also welcomes foreign investment. The Egyptians have invested in the country’s telecommunications network, concrete factories and construction industries, while the Chinese are keen on fishery resources, the mining industry and have developed a network of supermarkets selling Chinese-made consumerables.

Previously North Korea also benefited from co-operation with South Korea, which invested hundreds of millions into the Mt Kumgang resort where South Koreans and foreign visitors could stay and go mountain climbing. The Kaesong Industrial Park, which produced goods using South Korean know-how and North Korean labour, also gave it a financial boost until it was shut down last year following North Korea’s fourth nuclear test.

Dr Petrov said until last year China was also providing North Korea with other resources it needed such as crude oil and petroleum at “friendly prices” or possibly even for free.
It’s this type of trade that the Trump administration and the Australian government wants to block.

“They’re keen to see China stifling North Korea to death and causing the economic collapse of North Korea’s economy, which is unrealistic,” Dr Petrov said.

He said China sacrificed more than 250,000 soldiers during the Korean War to support the North Korean government. “It’s wishful thinking that China would just turn the tap off and allow the North Korean regime to implode.

“China understands that this would cause chaos in North Korea, the absorption of North Korea into South Korea and the subsequent advance of American troops to the Chinese border.

“So China is not going to allow the economic collapse of North Korea.” Dr Petrov said China was more likely to demonstrate its anger through ceasing economic co-operation temporarily, such as when it suspended the importation of coal after the assassination of Kim Jong-nam. “It bites but is not deadly,” he said.

But Dr Petrov said these types of actions were probably not going to be effective in curbing North Korea’s ambitions as it could always turn to Russia to help. “If China ceases economic co-operation, then Russia steps in and will continue doing the same,” he said.

“North Korea knows that well and plays off Russia against China, allowing Moscow and Beijing to compete for concessions on North Korea’s mining industry, fisheries and port facilities.” Russia is interested in North Korea because it sees it as a good market for Russian gas, oil and electricity. Russia believes North Korea could also potentially open the corridor for the export of energy to South Korea.

It sees North Korea as part of a potential transport corridor stretching from South Korea to Europe, via Russia’s Trans-Siberian Railway. “Russia is not interested in the collapse of North Korea but the stability and co-operation with North Korea,” Dr Petrov said.

Even other countries have had a hard time enforcing sanctions against North Korea.
A United Nations expert team released a report last month that found North Korea had managed to avoid sanctions by using Chinese front companies and other foreign entities to disguise where its goods were coming from. Last year it managed to continue its export of banned minerals and also has access to international banking.

Part of the problem is how different countries interpret what is banned by the sanctions.
One example was highlighted after Austrian ski equipment was found at the luxury Masik ski resort in North Korea. Austria later said it didn’t think ski lifts were included in the European Union’s definition of luxury goods prohibited from being sold to North Korea.

An Australian brand of ski clothing was even manufactured at the Taedonggang Clothing Factory in Pyongsong from 2014, but the company said it was not aware of the problem until after production had been completed and shipped to retail customers. It took two years for the company to sever its production line.

When asked how the conflict with North Korea could be resolved, Dr Petrov said: “Stop the war, end the conflict, reconcile and co-operate”. Dr Petrov believes that North Korea had a chance for survival if it could resume co-operation with South Korea, and this could happen if South Korea changed leadership at its May 9 presidential election.

He said co-operation did happen during the 10 years of the Sunshine policy that encouraged interaction and economic assistance between the two countries from 1998 to 2008, but the US actions were very important.
He said North Korea initially froze its nuclear program according to an agreement made when Bill Clinton was president but his successor George Bush scrapped this, which forced North Korea to resume its program.

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Korean Peninsula Looks More Divided than Ever

21 03 2016

Kaesong Industrial Park closing(AFP, Daily Mail, 12 February 2016) North and South Korea’s perennially volatile relations seem headed for a new and potentially dangerous low, with all official lines of communication cut off and a host of tension-raising issues on the near horizon.

The two rivals, who have remained technically at war over the past six decades, have faced and weathered numerous crises in the past, but the current situation feels particularly grim in the wake of the North’s recent nuclear test and long-range rocket launch.

Any hope of compromise or dialogue seems to have been indefinitely shelved, with a leader in Pyongyang confirming an unwavering commitment to nuclear weapons development, and a counterpart in Seoul determined to react firmly — and proactively — to any North Korean provocation.

And the standoff is taking on wider Cold War-like dimensions, with the divisions between the main parties to the North Korean nuclear issue — China and Russia on one side, the US, South Korea and Japan on the other — increasingly stark and antagonistic.

The new mood on the divided peninsula played out this week in the effective termination of the sole remaining North-South cooperation project — the Kaesong joint industrial zone lying 10 kilometres (six miles) over the border in North Korea.

– A talisman for ties –

Despite its obvious vulnerabilities, Kaesong had taken on a talismanic image by riding out pretty much every inter-Korean crisis thrown up since it opened for business in 2004.

“In a way, it’s a miracle it lasted that long,” said Leonid Petrov, an expert on North Korea at the Australian National University.

But on Wednesday, Seoul announced it was suspending all operations of the 124 South Korean companies in Kaesong, and yesterday Pyongyang responded by expelling all the firms’ managers and freezing their factories’ assets.

The North placed the complex under military control, while the South cut off all power and water supplies.

“I don’t see any way back for Kaesong now,” Petrov said. “It’s gone too far and there’s no real will in the North or South to work it out.”

Kaesong was born out of the “sunshine” reconciliation policy of the late 1990s.

One of the roles initially envisaged by Seoul was of Kaesong as a beachhead for market reforms in North Korea that would spread from the complex and expose tens of thousands to the outside world’s way of doing business.

Although that vision never materialised, some analysts still mourned its demise for closing a small but crucial open door on the world’s most heavily-militarised border.

– ‘Great leap backwards’ –

“With no Kaesong, South and North Koreans will no longer be in contact anywhere on a regular basis. That is a great leap backwards,” Aidan Foster-Carter, a Korea expert based in Britain, wrote for the NK News website.

Chang Yong-Seok, a senior researcher at the Institute for Peace and Unification Studies at Seoul National University, said one of Kaesong’s most important contributions had been to help keep inter-Korean rivalries in check.

“The Koreas both had a stake in Kaesong so they were able to restrain each other in some ways, but now that has all gone out the window,” Chang said.

The space for communication between Seoul and Pyongyang shrank further on Thursday, when the North announced it was cutting the last two remaining communication hotlines with the South.

The hotlines themselves have never been used for conversational diplomacy, but they were key to setting up meetings where such discussions could take place.

The severing of all contacts comes ahead of a period when crisis-control talks could be most needed.

– Tensions ahead –

North Korea will likely react strongly to whatever sanctions the UN Security Council eventually agrees to impose over its nuclear test and rocket launch.

Then in March, South Korean and the United States will kick off a series of annual military drills that the North views as rehearsals for invasion and which always see a spike in tensions.

Pyongyang’s claims of provocation over the exercises should be especially shrill this time, as Seoul and Washington also begin talks on deploying an advanced US missile shield in South Korea.

“South Korea and the US have said the drills will be on an even larger scale than usual which is sure to meet a big backlash from North Korea,” said Chang.

“So, with all this, I think we’re going to see tensions running at a level incomparable to previous years,” he added.





Two Koreas to continue high-level talks on Friday

14 02 2014

Panmunjom(NKnews.org 13 February 2014) North and South Korea will return to high-level talks on Friday to continue discussions on the subject of inter-Korean family reunions and looming U.S. and South Korean joint military drills.

Friday’s meeting follows lengthy inter-Korean negotiations held at Pyongyang’s request on Wednesday that failed to result in any tangible agreement between the two sides.

At Wednesday’s talks North Korea communicated to South Korea that forthcoming Foal Eagle and Key Resolve military drills should be cancelled or postponed, so at they do not overlap planned family reunions between February 20 to 25.

But on Thursday South Korea rejected the request, with South Korea’s Unification Minister Ryoo Kihl-jae telling parliament: “As far as we’re concerned, it’s impossible.”

While Reuters reported that U.S. Secretary of State John Kerry said Thursday that North Korea should not link forthcoming military drills with the issue of family reunions, one North Korea expert Leonid Petrov told NK News he was not optimistic about progress at Friday’s talks.

“If the South Koreans wanted to reopen Geumgangsan Mt. Resort they would have done so long time ago. The North Koreans know that and deliberately insist that family reunions should take place there. The timing for proposed family reunions is also ominous, given the joint ROK-US military drills in the area are scheduled precisely on the same day.”

Kerry also said on Thursday that the military exercises with South Korea later this month will be the same as those conducted in previous years.





North Korea to return six detained South Korean citizens

24 10 2013

dmz-from-north-korea_1(BY CHAD O’CARROLL , NK News, OCTOBER 24, 2013) North Korea announced on Thursday that six South Koreans who had been detained for illegally entering North Korean territory would be soon be released via the DMZ Panmunjom truce village.

“The North sent an official notice that the six will be returned at the neutral truce village of Panmunjom Friday afternoon,” an anonymous Minister of Unification official was quoted as saying Thursday by South Korea’s Yonhap News.

Mysteriously, the unification ministry source said that four of the six detainees had been previously mentioned by North Korean state media in February 2010, suggesting that at least part of the group may have been in North Korea for several years.

“A relevant institution of the DPRK recently detained four south Koreans who illegally entered it. They are now under investigation by the institution,” a short Korea Central News Agency bulletin said on February 26, 2010.

[…]

One expert told NK News that the news could be Pyongyang’s way of indicating a desire to warm inter-Korean relations, which despite improving in summer have been cooling of late.

“North Korea’s decision to release 6 detained South Koreans is another test for ROK President Park Geun-Hye’s “trustpolitik”. Now it will be up to Seoul whether to reciprocate, using this initiative as opportunity for reopening dialogue, trade and reconciliation” Leonid Petrov, a researcher at Australia National University, told NK News.

“49 North Korean spies have been caught in South Korea in the last decade, 4 of them just this year. Park Geun-Hye could pardon and deport them to the North as a symbolic sign of trust-building aimed at improving inter-Korean relations,” Petrov added, also pointing out that, “South Korea claims that about 500 of ROK citizens – most of them fishermen – are being held by North Korea: If Kim Jong-Un is serious about mending bridges with the South, he should let those people go or, at least, permit communication with them.”

South Korea’s National Security Law makes it illegal for South Korean nationals to make unauthorized contact with North Korea or enter North Korean territory. Normally, North Korean law also forbids South Koreans from entering DPRK territory.

In July 2012 68 year old South Korean national Ro Su-hui was arrested after walking from North to South Korea at Panmunjom. He was sentenced to four years imprisonment for illegally entering North Korea and ”benefiting the enemy”.

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S. Korea postpones international investment roadshow at Kaesong

15 10 2013

kaesong-complex-dprk(BY OLIVER HOTHAM, NK News, OCTOBER 15, 2013) SEOUL – An investment roadshow aimed at promoting foreign investment for the joint-run Kaesong industrial complex has been postponed, the South Korean government announced on Monday.

The event, intended to be held at the end of the month on October 31, had been planned to encourage foreign companies to set up factories in the jointly run Kaesong industrial complex, which currently only hosts South Korean companies that use North Korean labor. North Korea was informed of the postponement on Friday, and a new date for the show is yet to be set.

A Unification Ministry spokesperson who declined to be name told Agence France Presse that the delay was “inevitable” due to recent deteriorations in cross-border relations and “the lack of progress at talks with North Korea to enhance communication, and travel to and from Kaesong”.

“As is known,” the spokesperson said, “negotiations on Internet connectivity, mobile phone use, utilization of radio frequency identification tag to ease travel and customs inspections have made no headway since the North called off working-level talks for the Sept. 26 meeting”. The spokesperson said the government had decided that because of this failure to agree on matters crucial to foreign investors, they saw no point in going ahead with the roadshow.

“South Korea’s decision to postpone an investor-related event in the Kaesong Industrial Park is another indication of President Park’s “Trustpolitik” failure,” Professor of Korean History at Australia National University Leonid Petrov told NK News, explaining that “trust in inter-Korean relations is not going to be restored without concrete and mutually beneficial projects, such as Kaesong and Kumgangsan”.

“Only by ending the Korean War and formally recognizing one another can South Korea and North Korea improve the investment climate,” Petrov argued. “Without such changes, business people (both Koreans and foreigners) will remain hostages of Seoul and Pyongyang’s political games”…

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Koreas agree to further talks, inspect joint factory

9 07 2013

North-South-Korea-factory-talks_2013.07.08(By Steven Borowiec, The Christian Science Monitor, 8 July 2013) After 16 hours of negotiation North Korea agreed in principle to normalize operations at the inter-Korean industrial complex, which has been idle for nearly three months.

North Korea met over the weekend with South Korea on its side of Panmunjom Peace Village, taking steps to normalize operations at the jointly-maintained Kaesong Industrial park – an idled symbol of inter-Korean economic cooperation.

North Korea agreed to permit businessmen to visit the complex Wednesday to check out the facilities that have been idle since April, when North Korea blocked South Korean workers from entering the complex and then pulled out some 53,000 of its own workers. The two Koreas are planning to hold talks Wednesday about restarting business at Kaesong.

Analysts say that for North Korea, restarting operations at Kaesong could be less important than using the negotiations to extract larger forms of support from South Korea.

“The regime in North Korea wants to appear cooperative while working for something more substantial from South Korea, something like unconditional aid and investment,” says Leonid Petrov, a researcher in Korean studies at the Australian National University. “Aid, sponsorship, charity – those are the things they’re most interested in.”

In fact, says Dr. Petrov, domestic media reported that North Korea has dispatched its workers in provinces away from the complex, which indicates that perhaps it doesn’t plan to resume operations there in the near future.

More than 120 South Korean companies once operated at Kaesong, which opened in 2004 as a project to pair South Korean manufacturers with inexpensive North Korean labor. South Korean companies paid workers wages that were high by North Korean standards. In 2012, the industrial park, largely seen as an achievement in inter-Korea ties, produced $470 million worth of goods and earned North Korea about $80 million in workers’ wages, according to South Korea’s Ministry of Unification.

Before the talks, North Korea gave permission to South Korean businessmen to visit the complex, but the Park Geun-hye government in Seoul insisted that inter-Korean exchange go through the government, not through private groups or individuals.

On June 9, the Koreas held working-level talks, the first inter-Korean talks for two years. Those were meant to be preliminary discussions ahead of minister level talks that were scheduled for later that week, but the second talks were called off after Seoul and Pyongyang couldn’t agree on the rank of the delegation leaders.

In the first few months of this year, North Korea was exceptionally hostile with its rhetoric, making violent threats against Seoul and Washington. Analysts say the more conciliatory approach seen in this weekend’s agreement to allow visits is part of a typical pattern of behavior where Pyongyang alternates threats with moves toward rapprochement.

“North Korea usually comes out swinging in the first half of the year, then in the second half launches a kind of peace offensive,” says Sung-yoon Lee, assistant professor of Korean studies at the Fletcher School of Law and Diplomacy, Tufts University. “It was preordained that North Korea would want to talk about restarting the [Kaesong] complex now.”

Coming into this weekend’s negotiations, South Korea said it would seek a written guarantee from North Korea that Pyongyang would never again unilaterally shut down the complex. Analysts see this as a potential stumbling block in Wednesday’s scheduled talks; North Korea may object to making any promises about what it will do regarding facilities that are in its territory.





Moment of truth coming for President Park’s ‘Trustpolitik’

29 05 2013

park-geun-hye-multiplyingby Leonid Petrov (Australian National University, NKnews.org 28 May 2013)

CANBERRA – Inter-Korean relations are in the lime-light again. On June 15, Koreans in the North and South were meant to celebrate another anniversary of their first historic summit, which took place in Pyongyang thirteen years ago. Nevertheless, the late South Korean President Kim Dae-Jung and North Korean leader Kim Jong-Il would have been very sad to see how their successors continue destroying the legacy of the Joint North-South Korean Declaration.

After the recent exchange of threats and muscle-flexing, the demise of the Kaesong Industrial Complex (KIC) came as a symbolic end of a once-blooming inter-Korean reconciliation. What is particularly disturbing is that this happens just months after newly-elected South Korean President Park Geun-Hye had pledged to implement a new North Korea policy.

TRUSTPOLITIK

Based on the two principles of ‘Trustpolitik’ and ‘Alignment’, Park’s strategy was supposed to be more pragmatic than Kim Dae-Jung’s ‘Sunshine Policy’ but less ideologically-driven than Lee Myung-Bak’s ‘Vision 3000’. Disappointingly, Park’s strategy for the normalization of inter-Korean relations was flawed from the outset.

She emphasized the promotion of cooperation in security, which is impossible in the context of the continuing Korean War. She also insisted that the trust building process would be linked to the progress in resolving the nuclear issue and, finally, Park outwardly declared that her goal was to encourage North Korea to become a “normal state”. Such a program certainly has no appeal for Pyongyang to be cooperative in its realization.

The last five years have shown that neither in Seoul nor in Pyongyang is there any appetite for cooperation. The zones of economic cooperation are now dead and buried; they were too expensive for South Korean entrepreneurs and too damaging for the North Korean regime.

Politically, North and South Korea continue to demonstrate disdain to each other. In April Seoul was “demanding” that Pyongyang negotiate the resumption of KIC operations by setting an ultimatum. In response, the North cut a military hot line connecting the two militaries on both sides of the DMZ. In reciprocation, Seoul has recently brushed off a North Korean offer to resume the Six-Party Talks.

IMPOSSIBLE FACE-OFF

Zero-sum game on the Korean peninsula is continuing. Whatever North Korea proposes is blocked by the South and vice versa. Pyongyang policy makers know all too well that the Blue House in Seoul will refuse their offers, regardless of how sensible or tempting they might sound.

Similarly, the conservative Saenuri Party does not want to look weak or manipulated by Pyongyang’s initiatives and will always find a reason to decline the offer. Interestingly, however, mistrust between politicians sometimes creates some rare windows of opportunity, which could lead to a major breakthrough in inter-Korean relations.

No sooner did South Korean Foreign Minister Yun Byung-Se call upon North Korea to make some steps to resume economic cooperation in Kaesong then Pyongyang proposed the return of South Korean managers to the ill-fated Industrial Complex. The South has all reason to fear the abduction or usage of its citizens for propaganda campaign, but this visit could be helpful in minimizing financial losses through the conservation of the abandoned facilities until times are better.

This informal meeting could also be used as a second track dialogue opportunity to improve the atmosphere for government-level negotiations. Will South Korea use this occasion to break the vicious circle of mistrust with North Korea? The moment of truth is coming for President Park’s ‘Trustpolitik’.